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Priceline Continues to Soar to New Heights

Posted on Wednesday, Mar 19th 2008

Priceline.com (PCLN) recently announced their Q4 2007 results and very soon its stock price reached a new 52 week high of $129.24. The share is currently trading marginally above the $120 mark, having proved all critics wrong, and boasts a 52-week range of $51.61 – $129.24. This shouldn’t be happening in a recession, according to analysts!

I have covered Priceline earlier in my Web 3.0 series, as part of the online travel industry analysis, as well as the company specific analysis. The controversial Pricing Priceline piece last summer discussed the stock at length. Also read more on my analysis of Priceline compared with Expedia and Orbitz from December.

Priceline’s Q4 revenues of $335 million were 29% higher than previous year Q4 revenue of $260 million and by 2% compared to market expectations of $329 million. For the year, they reported revenues of $1.4 billion on gross bookings of $4.8 billion, compared to previous year revenue of $1.1 billion.

For the quarter, their merchant revenue contributed 68% and agency revenue 32% compared to previous year contributions of 79% and 21% respectively. Year on year, their domestic revenue grew by 24% and international revenue by 113% for the quarter.

Their EPS of $0.96 for Q4 was substantially higher than market expectations of $0.84 and 66% higher than the previous year’s $0.58. Their annual earnings of $4.04 also surpassed market expectations of $3.98 and previous year earnings of $2.03, registering an almost 100% increase.

During Q4 they spent $60 million to buy back a part of the minority interest in their principal international subsidiary that contains the booking.com business, and $15 million of cash on acquisitions.

For Q1 2008, Priceline is looking at gross bookings to grow by approximately 60% to 65% over the previous year, with international gross bookings from booking.com and Agoda growing approximately 85% to 90% on a year-over-year basis and domestic gross bookings growing by approximately 35%. They are targeting EPS of approximately $0.50 to $0.60 against market expectations of $0.59.

For the year 2008, they are forecasting gross bookings of between $7 billion and $7.3 billion with EPS between $4.80 and $5.10 against market expectations of $5.10.

Their revenue growth has been driven by international market expansion – both in the airlines and the hotel space. Thanks to their presence in over 60 countries, they are able to hedge potential recession facing the US. Bookings.com has helped them capture the market for European travelers coming into the US, lured by the cheap dollar against the robust euro.

Back in the US, they are experiencing robust market growth from their no-fee initiative on retail domestic fares as well as core merchant products.

Online travel industry should be looking glum according to analysts, but Priceline definitely does not seem to be showing any such signs in its financials or share price. I maintain what I said earlier about Priceline, that the stock crossed its earlier 52 week high of $104 on account of its strong fundamentals and not random speculation. The company seems to be delivering.

Priceline 1 year

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[…] The stock had been trading well above the $104 levels which it had reached at the peak of the dot-com era. In May this year, it recorded a new high of $144.34. After the announcement of the results, the stock fell 19% to $95 before rising to $117.20. Currently, it is trading at $97.17. I stand by my view – Priceline is strong fundamentally. […]

Online Travel: Expedia, Priceline, Orbitz - Sramana Mitra on Strategy Thursday, August 7, 2008 at 8:13 PM PT